Multi-level marketing businesses have enjoyed a big rise in sales over the COVID-19 pandemic. But what awaits the people who sign up to be a part of them?
“I’ve just done some videos to make up for yesterday. I didn’t post because it was my birthday.
“My friend said, ‘Laura, you don’t need to apologise, my love. We’re not in multi-level marketing anymore, it doesn’t matter.’
“And that’s the thing that I constantly struggle with. You’re in this constant ‘go-go-go’. You never relax. The level of it just blows your mind.”– Laura Elizabeth Dos Santos
Laura’s former trade is known by many different names: multi-level marketing, or MLM, network marketing, direct selling, or direct-to-consumer.
Multi-level marketing is a business model that can trace its origins back over a hundred years. Avon, for example, now a beauty company, has been operating in various forms since the 1890s. And Tupperware, a kitchen and household products brand, launched in post-World War 2 USA. It popularised the “Tupperware party” format — in-person product demonstrations — that would be the mainstay of MLM until the 2000s.
But the internet has enabled a new boom in the popularity of MLM.
You may have seen it without knowing: friends and family inviting you to their Facebook page for their new business, showing off their products, and inviting you to join their team.
COVID-19 has devastated businesses of all kinds across the world, closing offices, factories, venues and shops. But has it changed the MLM business model — and what are the consequences for the newly redundant and furloughed now entering that world?
How do MLMs work?
To understand the success of the MLM model, it’s important to know how MLMs operate.
It all starts at corporate level, in the head offices. This is where the big decisions are made: what to sell, how to make it, and how to market at the national or international level.
People at the corporate level do none of the selling themselves. These are the only people that get a salary.
Depending on the company, they may also distribute the products directly to customers when an order is placed.
The MLM company then recruits its first sales representatives. Sales reps can be known by many different names — reps, presenters, organisers, consultants — but they all do the same role, and do not get a salary.
Their job is to sell products, and to recruit more people as sales reps.
When they sell products, they get a cut of the profit.
When they recruit people, the higher-placed sales rep gets a small cut of the lower-placed sales rep’s profit.
When the lower-placed sales rep recruits someone, the higher-placed rep gets a cut of the new recruit’s sales, too.
This makes two revenue streams for a sales rep: from sales they make, and from sales that everyone beneath them — their “downline” — makes too.
As this income disclosure statement for Arbonne in the US shows, those at the bottom — those who are only selling products — make the least money.
Looking at the average earnings, it is only those further up the chain — the “upline” — that make a significant amount of money. Targeting those higher ranks is the goal for anyone that wants to make a living from MLM.
Many reps do it part-time, however, to top up their earnings from another job.
And those figures are earnings, not necessarily profit for a sales rep. Sales reps may have to pay expenses — travel, delivery costs, storage — that cut into those earnings.
Business is booming
The industry has seen a big boost in the pandemic. The Direct Selling Association (DSA) represents the interests of over 50 MLM companies in the UK. Their 2020 survey showed a 45.5% increase in sales across all of its members this year.
The DSA thinks there are over half a million people taking part in direct selling in the UK — an increase of nearly 50% from last year. Usborne Books At Home has seen its “organiser” pool more than double.
This is despite the pandemic making the usual product demonstrations and parties impossible. Instead, sales reps have turned to social media, using videos and livestreams to demonstrate products.
A sharp drop in footfall for high streets and shopping centres, both from the continuing rise of online shopping, and COVID-19 discouraging physical retail, may have contributed to the rise in direct-to-consumer sales.
Theoretically, with less time spent travelling to work and back — or having been made redundant, furloughed, or your hours reduced — there has never been an easier time to start direct selling.
But as the industry grows, so does the opposition to it.
Former sales reps, experts, and people concerned about friends and family in MLMs have formed large online communities dedicated to exposing bad practices and false promises found in MLMs. r/antimlm on Reddit has over 700,000 members – discussing, mocking, and meme-ing MLM practices.
Similar, smaller groups can be found across Facebook, Twitter, and Instagram.
“The sisterhood is a load of rubbish.”
Laura Elizabeth Dos Santos knows the appeal of MLMs well. She was a team leader at Younique, a popular MLM company selling beauty products.
Now she runs a YouTube channel dedicated to discussing the harmful practices that can be found in MLM companies — from the corporate level to individual sales reps.
“I had four children, stuck 13 floors up in a flat that I hated, I had just got married. I had literally no money — I got paid, bought the food, and that was it.
“I was in a desperate situation. I wanted something that was going to get my family out of this position.”
Laura was recruited by a friend that she had made in beauty discussion groups on Facebook. As she would later find when building her own team, personal connections are key to growing a team.
“They don’t just message you and say, ‘Come and join’, they befriend you in these groups.
“If you’re a mom, especially if your husband’s working, it can be quite lonely. You get all these women friending you and it’s really exciting. You see all of this makeup stuff that they post about.
“You think, ‘That looks awesome, I wish I could do that!’ And that’s what happened to me. I got suckered in.”
MLMs operate a progression scheme to reward sales reps: the more you sell, the more commission you keep from product sales.
“When you first start in Younique, you start as a ‘white status’. You’d receive 20% commission on anything you sell.
“Once you hit ‘yellow status’, which is $500 (it’s always measured in dollars) in lifetime sales, then you’ll get 25%. Once you hit ‘green status’, you get 30%.”
Green status involves selling $500 (£367) of products personally — plus building a team of at least 3 well-performing sales reps, and collectively selling $10,000 (£7314) worth of products.
It took Laura a year to reach this status.
The higher “statuses” require consistent sales over rolling 3-month period, from sales reps and their teams. The pressure to perform — on a personal level, and from team leaders — can be costly.
“The lower down reps, they tend to leave because you have to put $125 through every three months, which if they’re unable to sell, ends up coming out of their pocket.”
Some people end up never seeing a penny from their sales. Younique pays its reps by sending them a new debit card, called a “Purple Card”, and paying them after each sale.
“But what they don’t tell you is that you have to have $50 minimum commission before they even send the Purple Card. For the majority of people, that’s a lot. So it’s not an instant payment.
“And what I hear a lot from people is that they’ll start, and they’ll really struggle. If they only get like $20 commission in there, they’ll never receive that $20 anyway.”
From Laura’s experience, the bright, positive, and forward-thinking face of MLMs does not match the reality. On her YouTube channel, she tells the stories of current and former sales reps.
“The main thing that I get from the lower down reps is the bullying. The bullying is insane. They get outcast if they don’t perform. It is very cold: the ‘sisterhood’ is a load of rubbish.”
The effect on sales reps’ relationships can be extreme.
“I had a man email me. He said: ‘Sorry, I’ve just come across this on YouTube, I was researching. I’m desperate, my girlfriend is literally picking the MLM over me. She’s not coming home. I don’t know what to do. How can I help get her out?’
“It destroys relationships, it really does.”
“It has all the elements of a cult.”
One of the biggest concerns around MLMs is the methods used by recruiters to convince people to join and stay — and the effect that it has on them after they leave.
Emma*, a founding member of The Anti-MLM Coalition, is a cognitive behavioural therapist — helping people to change the way they think and behave. Cognitive Behavioural Therapy (CBT) is used to treat a range of mental illnesses, including anxiety and depression.
It was through her CBT work that Emma first became aware of MLMs — and the impact they can have on people.
“It has all the elements of a cult. If you’re ‘successful’ that’s their gift to you. If you’re ‘not successful’ — that’s your flaws. You didn’t want it enough, you didn’t try hard enough, you didn’t focus hard enough.
“It takes away your critical thinking, it takes away your confidence, it takes away your independence. That’s one of the most damaging aspects.”
Retaining a seller, once they have signed up, is key to the business model. It can take a lot of time and effort to turn a significant profit.
“One of the things they do early on is to preempt any kind of negative feedback, or questioning from family and friends. I’ve been to training sessions, where people have said ‘Now you’ve joined us, the sky’s the limit. If you want it enough, it’s up to you.’
“They say when someone comes to you and says ‘It’s a scam, you’re never gonna make money’, [that]they’re envious because you’re moving on and they’re stuck in a boring job, they’re not creative and imaginative.”
Having given their new sales reps a way to dismiss any criticism of their work, Emma thinks that the MLMs’ next step is to make sales reps feel like this is the place where they truly belong.
“There’s a lot of love bombing — ‘you’re amazing, you’ll do so well.’ And if the person selling you this dream is a trusted friend, or that lovely lady you met at the baby group, your guard is down.”
“They create this world full of positive thinking, and try to detach you from the negative, ‘outside’ world.
And the more that you invest in that world, the more you interact with those people every day, the more you listen to the training and the inspirational stuff, the more you’re emotionally hooked in.”
“She was broken by it.”
As an example of one particularly bad experience she’d come across in MLM, Emma shared this story:
“There was one woman that I came across just about a year ago. She had joined [an MLM company]. She couldn’t really work because she had a major heart defect, from her childhood. And she knew that at some point, she’d have open heart surgery in her late 30s.
“So she thought, ‘Well, what can I do that will let me work from home and be flexible, so that if I need to have surgery, I can stop and pick it up again?’.
“So she paid her money to join. And then she needed to buy some more products, because you need to sell more, and if you can’t demonstrate them it’s difficult. So she was spending money, spending money, spending money, and then the date for the heart surgery came up.
“When she asked to stop, her upline hit the roof. She was under severe pressure, not only to not stop during the period of surgery, but to continue working from a hospital bed.
“It got very nasty, she was severely bullied at a time when she really could have done without it. And when she stopped, she was targeted online, with some pretty abusive, threatening stuff, but she was too frightened to do anything about it.
“She’d been sucked into that world, and believed that these people were her friends. When they turned on her, she felt really, really abandoned.
“And so she ended up severely stressed, and financially down about £1500-£2000 pounds, which for her was a huge amount of money. And with less confidence than she ever had.
“It was really an appalling experience, and she was in tears to me on the phone. She was broken by it.”
“Keep the conversation open.”
The online conversations between sales reps and the anti-MLM community frequently turns to insults, mockery and mud-slinging.
Is there a healthier way to talk about MLMs, with your friends and loved ones?
The Anti-MLM Coalition’s Emma thinks so.
“We’ve concluded that the best way is to try and keep the conversation open, where you’re rather ‘Socratic’ in your approach.
“So you’re asking them about their MLM, asking them questions — how do you keep a record of what you’re spending versus what you’re earning? Tell me about how they train you, tell me about the finances.
“Get them to self-question it, and then be there for them, when they hopefully have that realisation.”
YouTuber Laura Elizabeth Dos Santos agrees:
“The big reason why people won’t talk about it is that people get embarrassed, they feel really silly. And they’re going to get very, very defensive. So it’s just not worth starting an argument.
“It’s hard, but remain calm and just let them know, ‘I’m here for you. I’m not supporting this, but when you’re ready, I am here’, and that is literally all you can do. You can’t ‘pull people out’, unfortunately.”
Have you, your friends or your family been affected — success stories or horror stories — by multi-level marketing during the pandemic? Tweet @ThisIsTomFair, or comment below.
Or play MLM Quest, and find out how far you’d go to make your multi-level marketing dream a reality.
*Emma has withheld her last name to protect herself from online abuse.